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|Primary sector: raw materials
Secondary sector: manufacturing
Tertiary sector: services
|Colin Clark · Jean Fourastié|
|Quaternary sector · Quinary sector|
|Sectors by ownership|
|Business sector · Private sector · Public sector · Voluntary sector|
Social economy refers to a third sector in economies between the private sector (business) and the public sector (government). It includes organizations such as cooperatives, nonprofit organizations, and charities.
|This section requires expansion. (June 2012)|
Social economy: a third sector in economies 
Economies may be considered to have three sectors:
- the business private sector, which is privately owned and profit motivated;
- the public sector which is owned by the state on behalf of the people of the state;
- the social economy, that embraces a wide range of community, voluntary and not-for-profit activities.
Sometimes there is also reference to a fourth sector, the informal sector, where informal exchanges take place between family and friends.
The third sector can be broken down into three sub-sectors; the community sector, the voluntary sector and the social enterprise sector:
- The community sector includes those organisations active on a local or community level, usually small, modestly funded and largely dependent on voluntary, rather than paid, effort. Examples include neighbourhood watch, small community associations, civic societies, small support groups, etc.
- The UK's National Council for Voluntary Organisations describes the voluntary sector as including those organizations that are: formal (they have a constitution); independent of government and self-governing; not-for-profit and operate with a meaningful degree of volunteer involvement. Examples include housing associations, large charities, large community associations, national campaign organisations, etc.
- According to the UK government's definition, the social enterprise sector includes organisations which "are businesses with primarily social objectives whose surpluses are principally reinvested for that purpose in the business or in the community, rather than being driven by the need to maximise profit for shareholders and owners". Examples include co-operatives, building societies, development trusts and credit unions.
The social economy spans economic activity in the community, voluntary and social enterprise sectors. The economic activity, like any other economic sector, includes: employment, financial transactions, the occupation of property, pensions, trading, etc.
The social economy usually develops because of a need to find new and innovative solutions to issues (whether they are socially, economically or environmentally based) and to satisfy the needs of members and users which have been ignored or inadequately fulfilled by the private or public sectors.
By using solutions to achieve not-for-profit aims, it is generally believed that the social economy has a distinct and valuable role to play in helping create a strong, sustainable, prosperous, and inclusive society.
Successful social economy organisations can play an important role in helping deliver many key governmental policy objectives by:
- helping to drive up productivity and competitiveness;
- contributing to socially inclusive wealth creation;
- enabling individuals and communities to work towards regenerating their local neighbourhoods;
- showing new ways to deliver public services; and
- helping to develop an inclusive society and active citizenship.
Defining the limits of the social economy sector is made especially difficult by the ‘moving sands’ of the political and economic context. Consequently, at any particular point in time organisations may be 'partly in, partly out' or moving within the various sub-sectors of the social economy.
There is no single right or wrong definition of the social economy. Many commentators and reports have consciously avoided trying to introduce a tight definition for fear of causing more problems than they solve.
The Social Enterprise Compass 
One solution can be to locate organisations in the Social Enterprise Compass. The Social Enterprise Compass locates enterprises and organisations in the field between the business private sector and the public sector.
The horizontal axis
On the horizontal axis each enterprise/organisation is categorized by its ownership. On the left side the ownership lies with the public authorities whereas on the right side the ownership lies with private people. So the distinctive feature is the ownership of the enterprise.
Is it private?
The term “private industry” contains all economic activity that deals with the capital of one or many private owners with a view to making profits. The capital owners bear the risk.
Is it public?
The term “public authorities” contains all economic activity where the public authorities possess the capital on either European, federal, regional or local level. That includes all nationalised and public industries.
The vertical axis
On the vertical axis, each enterprise/organisation is categorized by the primary objective of the enterprise. The dimensions range between social purpose at the top and commercial purpose at the bottom of the axis.
On the vertical axis an organisation reaches the top, i.e. the social purpose is the primary objective of the enterprise, if it fulfils the following criteria:
A. Ethical concept
(core definition for enterprises/organisations of the social economy)
This core definition is the ideal of an enterprise/organisation. Only these enterprises/organisations belong to the social economy whose ideal is a clearly defined ethical concept.
The primary objective of the enterprise is the improvement of the life situation and the chances of disadvantaged people as well as social cohesion and support.
C. Social economic creation of value and appropriation of earnings
(qualitative key identification)
The profits and the resources are verifiably reinvested for the benefit of disadvantaged people.
If the criteria A, B and C are totally fulfilled, an organisation can locate itself at top of the vertical axis.
There is one last criterion which is not definitional but a describing feature:
D. Intermediary function
Social economical enterprises/organisations have an intermediary function between public and private.
If none of the criteria above is fulfilled or the primary object of the enterprise is the commercial purpose then an enterprise / organisation is located at the bottom of the vertical axis.
Location between social and commercial purpose
If the criteria above are only partly fulfilled the enterprise is located between the top and the bottom of the vertical axis according to its self-definition.
International comparisons 
In France 
The term social economy derives from the French économie sociale, a term first recorded in about 1900. There, the sector is usually taken to comprise four families of organisations: co-operatives, mutuals, associations (voluntary organisations) and foundations (which in France must be recognised as being of 'public utility'). In France, social economy is a major sector, it represents 12% of employment and also 12% of GDP.
In Spain 
In Spain, the concept of economía social is well recognised in the academic, political and economic fields. There is a national confederation of social economy enterprises named CEPES, that includes worker-owned companies or cooperatives and mutualities.
In Spain, social economy is a major sector, it represents near 9% of employment. The first Law of Social Economy in Europe was going to be approved in Spain in early 2011.
In Latin America 
In other Spanish speaking countries the concept of economia social is largely accepted, as in Argentina, Venezuela or Cuba.
The government of Hugo Chávez believes that the informal sector can be absorbed into the social economy of Venezuela by strictly controlling or nationalising large firms and creating new legal forms for private enterprise that are more accessible to the poor. Wage labour is viewed as a source of exploitation, and the government hopes to reduce or eliminate it by promoting democratic corporate governance, family and cooperative businesses, and by restricting labour contracts. The government plans to provide technology, training, finance, and exclusive contracts to these small enterprises so that they can survive in the national marketplace.
In the European Union 
At the European level, the French definition tends to hold sway. In 1989, the Delors Commission established a 'Social Economy Unit' to come to terms with this movement at European level, but following opposition or miscomprehension from some other Member States and movements, official texts adopted the cumbersome term 'Co-operatives, Mutuals, Associations and Foundations' (or 'CMAFs' for short). More recently, the term 'social economy' has regained respectability, and is one of the nine themes of the €3 billion 'EQUAL' Community Initiative. In Ireland, for example, the social economy is well respected and heavily funded. A strong example would be the establishment of rural transport schemes, to assist socially disadvantaged in isolated locations.
The European Economic and Social Committee has recently published a study, drawn up by CIRIEC (International Centre of Research and Information on the Public, Social and Cooperative Economy) on The Social Economy in the European Union, available in the 21 official languages of the Union, see "The social economy in the European Union, 2012" http://www.eesc.europa.eu/?i=portal.en.social-economy-category-.25290.
In the United Kingdom 
Scotland thinks more readily in terms of the social economy than social enterprise.
In New Zealand 
In the USA 
The designation of sectors is a somewhat ambiguous construct, as it has no consistent formal definition. Informally, it is employed in the United States as an equivalent to industry; whereas, the OECD defines sectors in a number of different ways - depending on the statistical purpose. Sector can be seen as a grouping of institutions, as by government (taxing authority), business (taxable profit-making), philanthropy (untaxed nonprofit), and household (taxable personal income). However, in the United States, where business preeminence is emphasized, organizational form differentiates conventional and hybrid 'business' forms, with the latter 'hybrid organization' type having a distinct social mission while permitting pursuit of profit. This has come to be treated in the tax codes of several States with such new entities as the "B Corporation", "Benefit Corporation", and "For-Benefit Corporation". Importantly, these are not precisely the same, although having similarities, which are discussed under the designation in the United States as "The Emerging Fourth Sector". This Emerging Fourth Sector differs from the Third Sector first by its location within the United States and second by its emphasis of business leadership versus governmental leadership within the philanthropic sector or within entities with a social mission - although the 'hybrid organization' form used in both instances is essentially the same. Outside the United States, governments often establish national plans for the Third Sector, which formalizes the role of governments; but in the United States, such governmental 'planning' is discouraged, while market-based mechanisms are emphasized, as with such ideas as 'social entrepreneurship'. A useful discussion of sectors and "social economy" can be found in Business with a Difference: Balancing the Social and the Economic, a book by Mook, Quarter, & Ryan produced with support of the Social Sciences and Humanities Research Council of Canada and in furtherance of work by the Association of Nonprofit and Social Economy Research (ANSER).
See also 
- Civil Society
- Cost the limit of price
- Social innovation
- Voluntary sector
- Solidarity economy
- CIRIEC-International - Centre International de Recherche et d'Information sur l'Économie Publique, Sociale et Coopérative
- European Social and Economic Committee- Study: The Social Economy in the European Union
- Social economy enterprises, section of the European Union
- The Social economy network
- Social economy Bristol
- Canadian Social Economy Hub
- BC Social Economy Roundtable
- Association for Social Economics (ASE)
- Encyclopedic Dictionary of Public Administration, Social Economy
Further reading 
- For All The People: Uncovering the Hidden History of Cooperation, Cooperative Movements, and Communalism in America, PM Press, by John Curl, 2009, ISBN 978-1-60486-072-6